“Only buy something that you’d be perfectly happy to hold if the market shut down for 10 years.”
— Warren Buffett
The Warren Buffett investment philosophy calls for a long-term investment horizon, where a decade-long holding period, or even longer, would fit right into the strategy. How would such a strategy have worked out for an investment into Conagra Brands Inc (NYSE: CAG)? Today, we examine the outcome of a decade-long investment into the stock back in 2010.
| Start date: | 06/03/2010 |
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| End date: | 06/02/2020 | ||||
| Start price/share: | $19.26 | ||||
| End price/share: | $34.47 | ||||
| Starting shares: | 519.21 | ||||
| Ending shares: | 695.62 | ||||
| Dividends reinvested/share: | $7.88 | ||||
| Total return: | 139.78% | ||||
| Average annual return: | 9.13% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $23,968.98 | ||||
The above analysis shows the decade-long investment result worked out well, with an annualized rate of return of 9.13%. This would have turned a $10K investment made 10 years ago into $23,968.98 today (as of 06/02/2020). On a total return basis, that’s a result of 139.78% (something to think about: how might CAG shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Conagra Brands Inc paid investors a total of $7.88/share in dividends over the 10 holding period, marking a second component of the total return beyond share price change alone. Much like watering a tree, reinvesting dividends can help an investment to grow over time — for the above calculations we assume dividend reinvestment (and for this exercise the closing price on ex-date is used for the reinvestment of a given dividend).
Based upon the most recent annualized dividend rate of .85/share, we calculate that CAG has a current yield of approximately 2.47%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of .85 against the original $19.26/share purchase price. This works out to a yield on cost of 12.82%.
More investment wisdom to ponder:
“Sentimentality about an investments leads to lack of discipline.” — Sam Zell
